What to Watch on Local Minimum Wage Increases: State Preemption

Minimum wage increases in cities and counties across the country are being rolled back or stopped in their tracks by state preemption laws.

Last year was dubbed “the year of the minimum wage increase,” according to a National League of Cities report, due to a growing number of ordinances poised to raise local minimum wages in cities or counties across the United States. But 2016 was simultaneously the “year of the minimum wage preemption.”

In the minimum wage standoff between state governments and city halls, state legislatures hold the upper hand, according to NPR. States can outmaneuver cities that implement minimum wage increases by passing preemption laws that forbid cities from setting their minimum wage higher than the statewide rate.

Twenty-seven states have passed preemption laws up to now. After St. Louis raised its minimum wage to $10 per hour earlier in the year, the Missouri Legislature responded with a state law striking back the city’s minimum wage to the state’s $7.70 per hour, to be enforced in August. Several counties in Iowa also had their increased minimum wage rates rolled back by state preemption laws this year.

Following different minimum wage laws within a state adds complication to operations and can potentially reduce hiring for small businesses. Hikes in minimum wages burden small business owners with additional costs, forcing them to re-evaluate the employment of current or future employees. It hits entry-level workers especially hard, ultimately harming the employees a rate hike intends to help.